- 60% of mortgage holders don’t know the current interest rate on their home loan
- Men are more likely than women to say they know their current interest rate
- One in four borrowers expect to pay their mortgage off in less than 10 years
- 42% of mortgage holders have switched lenders, or considered it, in the past six months significantly higher than in 2015
Sixty per cent of Australian mortgage holders don’t know what interest rate they are currently paying on their home loan, despite interest rates topping the list of reasons why borrowers switch lenders.
A national survey commissioned by Australia’s largest customer-owned financial services provider, CUA, has revealed that 28 per cent of borrowers are ‘not sure’ of their current home loan interest rate. A further 32 per cent only knew ‘approximately’ what rate they were paying.
Just over 1,000 Australians aged 25-49 were surveyed in January as part of the CUA National Mortgage Survey, with half of the survey respondents currently holding a mortgage.
CUA Head of Product Mark Petty said it was surprising that only one in four borrowers could quote their home loan rate to two decimal places given the amount of money at stake.
“For most of us, our home is our most valuable asset and our mortgage is typically our biggest weekly expense, so it is really surprising just how low the awareness is about what people are actually paying on their loan,” he said.
“We’re seeing people shopping around much more than we were 6-12 months ago. More borrowers are looking to smaller lenders, including credit unions, and around 42 per cent of mortgage holders had switched lenders, or thought about it, in the past six months - up from 31 per cent in May 2015. Of that number, nearly half cited interest rates as one of their reasons.”
Interest rates were also the number one reason to consider moving from a variable to a fixed rate – three quarters said they would switch, or consider switching, to a fixed rate if they were offered a rate 0.50% p.a. lower than they were currently paying.
The survey revealed that men were more likely than women to to say they knew the ‘exact’ rate they were paying – just under half, compared to less than one in three women. There was also a clear link with how much borrowers earned, with those on higher incomes more likely to know their interest rate.
Despite the low awareness of the true cost of their mortgage, 60 per cent of mortgage holders thought they’d be able to pay their loan off in less time than the term of their loan.
One in four survey respondents expected to pay off their loan in under 10 years, and 40 per cent estimated they’d pay their loan out in 10-20 years – much less than the typical home loan term of 25 to 30 years.
“Interest rates, and also fees and charges, are clearly top of mind when people are shopping around for a home loan. But it seems that for the majority of home owners, they don’t pay much attention to the interest rate until the time comes that they are looking to switch,” Mr Petty said.
“It’s interesting that Australians want to pay off their home loan in the shortest possible time, but that aspiration is at odds with low awareness of the interest rate they’re paying on their home loan today.
“Home owners need to do their homework to make sure they’re getting good value for money. While interest rates are often the main focus for borrowers, it’s important to also compare fees and charges, and loan features. For instance, offset accounts or flexibility to make additional repayments can make a big difference to how quickly you pay off the loan.”
The CUA National Mortgage Survey also found:
- One third of respondents expected interest rates to increase by the middle of the year – up from one quarter who had been expecting a rate hike during 2015.
- Fewer young people are considering taking out a home loan – just 27 per cent of those aged 25-29 intend to get a mortgage in the next two years, compared to 41 per cent in 2015.
- 45 per cent of mortgage holders said paying off a home felt like ‘a part of life’, compared to just 30 per cent of non-mortgage holders.
- If they didn’t need to pay their mortgage for a year, 70 per cent of all mortgage holders said they would still put the money towards their mortgage or save the money.
- Respondents would prefer to work an extra three hours a day (43 per cent), if it meant they could take a year-off mortgage repayments, than move in with their in-laws (25 per cent).
The CUA National Mortgage Survey is an annual consumer survey of mortgage intentions and consumer attitudes. Polling was conducted by The Digital Edge during January 2016, with 1007 Australians, aged from 25 to 49, being surveyed. Half of those surveyed currently held a mortgage.